World Citizens – Life Leads and Money Follows

We often talk about disruption of industries and companies; we talk about how technology has changed. Slowly and silently, the way people work and live their lives is also changing. By this we are not referring to people working out of coffee shops, or Skype meetings ahead of a surf in Muizenberg. What we have observed is that the world has become a very small and fluid place where people and our clients are moving often across different tax jurisdictions.

Many people work for multinationals or are consulting to international firms, and this creates great complexity in their financial, tax and estate planning.

Let’s consider ‘’Joe”, an imaginary Veritas client who emigrated to Dubai 10 years ago to work for a multinational. We continued to help him with his financial affairs as he had intended coming back to South Africa. He was very successful in Dubai and his kids were about to go to high school. He had been told by his Dad that, “once a kid gets to 14 they have an opinion on where they want to live (a serious teenage opinion!)”. He spoke to Veritas about where he was looking to move to next and he said he was looking at different jobs in Frankfurt, New Orleans, London, Quebec and Sydney. As a financial planner our heads were spinning. Each of those jurisdictions has different tax, estate duty and money laundering rules. If you had to set up an offshore trust, the treatment of the proceeds and the gains and income tax are completely different in each jurisdiction.

Life leads

In the end, we asked that he makes his career and life choices first: where do you want to work, where does your family want to live and to what schools or universities do you want your kids to go? Where will you end up in the end after you retire?

Money/advice follows

Once we knew this, we knew we could start to apply our minds to the consequences of a move from Dubai to wherever. What happened here was that he made a career/life/family decision and now the money would follow. As his financial adviser, we did not know the ins and outs of his new country and felt very vulnerable as his adviser.

At Veritas, we are all Certified Financial Planner® (CFP) professionals. CFP® is an international designation, like a CA or CFA. Anyone who has this designation has got a postgraduate diploma in financial planning in their jurisdiction. They also sign up to a code of ethics and are members of a local professional body. In South Africa, this body is called the Financial Planning Institute (FPI). Like practitioners in other professions, we are bound by our code of ethics and this includes being honest with our clients and giving them advice that is in their own best interests. We are not sales people or product pushers.

We realised that in Joe’s case, we needed to collaborate with a CFP® in his new country to ensure continuity in his financial planning, that it takes into account the laws and regulations in the new jurisdiction and that he continues to have the best advice close at hand. What happens to his pension? Should he have an offshore trust? What happens to the proceeds of his South African estate and its beneficiaries?

To give you a few other examples we regularly come across in South Africa:

A common problem we see is that young people leave South Africa without officially emigrating. They continue to be seen by SARS as South African taxpayers and could be liable to pay tax on their foreign earnings. Moving overseas without emigrating can also have massive ramifications on their inheritances, especially if they are beneficiaries of a trust in South Africa.

Moving to the United States has enormous implications. The US, under President Obama, drove out all offshore structures. They have made conditions so draconian that it is not worth having anything other than a US company or structure to take care of your affairs.

Complex and changing laws and regulations in different jurisdictions need to be dealt with actively and professionally. We realise that it is not in our clients’ best interests to restrict them to our advice.

We have therefore linked up with a network of advisers called World Citizens which vets and selects CFP® Professionals all over the world. Veritas is now one of World Citizens’ go-to firms in South Africa. What this means is that Veritas is now well placed to ensure that our clients receive the best financial planning advice wherever they might be in this world of ours.